Tuesday, December 31, 2013

Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources PolicyThe Renewable Fuel Standard (RFS) was expanded under the Energy
Independence and Security Act of 2007 (EISA; P.L. 110-140) in an effort to
reduce dependence on foreign oil, promote biofuel use, and stabilize
transportation fuel prices, among other goals. Over 15 years, the RFS requires
that increasing amounts of biofuels—36 billion gallons by 2022—be used in transportation
fuel. The mandate is to be accomplished in part with advanced biofuels,
including cellulosic biofuels—fuels produced from cellulosic materials
including grasses, trees, and agricultural and municipal wastes—which
would increase over time to comprise some 44% of the RFS in 2022.

The U.S. Environmental Protection Agency (EPA) is required to set the annual
standard for cellulosic biofuels under the RFS for the following year by
November 30. If projected cellulosic biofuel production is less than the
volume specified in the statute, EPA can lower the cellulosic biofuels
standard. EPA concluded that the nation lacked sufficient production capacity
to meet the RFS cellulosic biofuels mandate for 2010, 2011, 2012, 2013,
and 2014. EPA reduced the mandate for 2010 (from 100 million gallons to 5
million gallons actual volume), 2011 (from 250 million gallons to 6.6
million gallons), 2012 (from 500 million gallons to 8.65 million gallons, later
vacated by a federal court decision and reduced to zero), and 2013 (from 1
billion gallons to 4 million gallons). EPA proposes to lower the 2014
mandate from 1.75 billion gallons to 17 million ethanol-equivalent
gallons, and to rescind the 2011 cellulosic biofuel standard.

The 2010-2012 reduced mandates were not met by actual cellulosic biofuel
production, which EPA reports was limited. Instead, these mandates were
largely met with waiver credits. EPA reports that the cellulosic biofuels
industry is growing incrementally, noting that two commercialscale cellulosic
biofuel facilities began fuel production in 2013, although it is unlikely that enough
fuel will be supplied to meet the mandate.

The cellulosic biofuels industry may be able to produce enough fuel to meet the
RFS mandates if certain obstacles are overcome: lowering the cost of
conversion technology at the initial stages of commercial application,
easing access to financing, removing feedstock supply uncertainties, and creating
certainty for tax incentives. Another challenge for the cellulosic biofuels
industry—and all biofuels industries—is the petroleum industry’s
opposition to the RFS overall, in part because it views the RFS as
unworkable. Other industries—livestock and poultry producers in particular—have
joined the petroleum industry in requesting that the RFS be modified, in many cases
for reasons unrelated to cellulosic biofuel supply. Another supply constraint
is the blend wall—the upper limit to the total amount of ethanol that by law
can be blended into U.S. gasoline.

Several federal programs assist the cellulosic biofuels industry, including the
U.S. Department of Agriculture’s (USDA’s) Biorefinery Assistance Program
and Biomass Crop Assistance Program, and the U.S. Department of Energy’s
(DOE’s) Loan Guarantee Program. EPA reports that some of the cellulosic
biofuel companies identified in its 2014 proposed rule received or were offered significant
federal financial support (approximately $387 million) in the form of grants
and loan guarantees from USDA and DOE.

Many questions about cellulosic biofuels and the RFS have arisen. Can the RFS
mandate for cellulosic biofuels be met? If so, when would it be met? What
impact will the continued lowering of the cellulosic biofuels mandate by
EPA have on investment in production? Should Congress continue to provide
support for cellulosic biofuels, and if so, how? Might Congress statutorily increase
the number of qualified feedstocks for the RFS cellulosic biofuels category,
given the 112th Congress amendment of the definition of cellulosic biofuels to include
algae for some tax incentives? What impact will other legislative
discussions (e.g., military support for biofuels) have on the RFS
cellulosic biofuels mandate?

This report, in a question and answer format, discusses some challenges facing
the cellulosic biofuels community, including feedstock supply estimates,
and potential legislative options to address cellulosic biofuels
production uncertainty for the RFS.

Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources PolicySevere wildfires have been burning more acres and more structures in recent
years. Some assert that climate change is at least partly to blame; others
claim that the increasing number of homes in and near the forest (the wildland-urban
interface) is a major cause. However, most observers agree that
wildfire suppression and historic land management practices have led to
unnaturally high accumulations of biomass in many forests, particularly in
the intermountain West. While high-intensity conflagrations (wildfires
that burn the forest canopy) occur naturally in some ecosystems (called
crown-fire or stand-replacement fire ecosystems), abnormally high biomass levels
can lead to conflagrations in ecosystems when such crown fires were rare
(called frequentsurface- fire ecosystems). Thus, many propose activities
to reduce forest biomass fuels.

The characteristics of forest biomass fuels affect the nature, spread, and
intensity of the fire. Fuel moisture content is critical, but is generally
a function of weather patterns over hours, days, and weeks. Fuel size is
also important—fine and small fuels (e.g., needles, grasses, leaves, small twigs)
are key to fire spread, while larger fuels (e.g., twigs larger than
pencil-diameter, branches, and logs) contribute primarily to fire
intensity; both are important to minimizing fire damages. Fuel
distribution can also affect damages. Relatively continuous fuels improve
burning, and vertically continuous fuels—fuel ladders—can lead a surface
fire into the canopy, causing a conflagration. Total fuel accumulations (fuel
loads) also contribute to fire intensity and damage. Thus, activities that
alter biomass fuels—reducing total loads, reducing small fuels, reducing large
fuels, and eliminating fuel ladders—can help reduce wildfire severity and
damages.

Several tools can be used to reduce forest biomass fuels. Prescribed burning is
the deliberate use of fire in specific areas under specified conditions.
It is the only tool that can eliminate fine fuels, but is risky because it
burns any fuel available. Wildland fire use is the term used for allowing a wildfire
to be used like a prescribed burn (i.e., within specified areas and
conditions). Thinning is a broader forestry tool useful for eliminating
fuel ladders and total fuels in the crown, but it does not eliminate fine
fuels, and it concentrates fuels in a more continuous array on the surface. The combination
of thinning with prescribed burning is often proposed to combine the benefits,
but it also combines the cost of both. Logging does little to reduce fuel
loads.

The federal land management agencies undertake all of these activities under
general authorities for wildfire protection and land and resource
management. Fuel reduction, primarily via prescribed burning, is funded
with direct annual appropriations for wildfire management. Other activities,
particularly thinning, are funded through other annual appropriations accounts,
such as vegetation management. Also, several mandatory spending accounts
provide funds for related activities, such as treating logging and
thinning debris. In addition, wildfire assistance funding allows the
Forest Service to provide technical and financial aid for reducing forest
biomass fuel loads on nonfederal lands, among other things.

The issues for Congress include the appropriate level of funding for prescribed
burning and thinning for fuel reduction and the appropriate reporting of
accomplishments. Current reporting does not identify ecosystems being
treated and the effectiveness of the treatments. Similarly, current
appropriations and reporting do not distinguish thinning for fuel reduction
from thinning for other purposes, such as enhancing timber productivity.
More complete reporting could allow Congress to better target its
appropriations for fuel reduction to enhance wildfire protection.

Monday, December 30, 2013

Dennis A. Shields
Specialist in Agricultural PolicyThe U.S. Department of Agriculture (USDA) offers several permanently
authorized programs to help farmers recover financially from a natural
disaster, including federal crop insurance, the Noninsured Crop Disaster
Assistance Program (NAP), and emergency disaster loans. The federal crop
insurance program is designed to protect crop producers from unavoidable risks
associated with adverse weather, and weather-related plant diseases and
insect infestations. Producers who grow a crop that is currently
ineligible for crop insurance may be eligible for a payment under NAP.
Under the emergency disaster (EM) loan program, when a county has been declared
a disaster area by either the President or the Secretary of Agriculture,
agricultural producers in that county may become eligible for low-interest
loans.

In order to provide a regular supplement to crop insurance and NAP payments and
to assist livestock producers who are generally not covered by these
programs, the Food, Conservation, and Energy Act of 2008 (P.L. 110-246,
the 2008 farm bill) included authorization and funding for five new
disaster programs to cover losses from weather events, beginning with 2008
crops and ending September 30, 2011.

The 2008 farm bill programs were designed to address the ad hoc nature of
disaster assistance provided to producers during the last two decades. The
largest of the now-expired programs under the 2008 farm bill is the
Supplemental Revenue Assistance Payments Program (SURE), which is designed
to compensate eligible producers for a portion of crop losses that are not
eligible for an indemnity payment under the crop insurance program. The
2008 farm bill also authorized the Tree Assistance Program (TAP), under
which eligible orchardists and nursery growers can receive a payment to cover
70% of the cost of replanting trees or nursery stock following a natural disaster,
and three livestock assistance programs. These are (1) the Livestock Indemnity
Program (LIP), which compensates ranchers at a rate of 75% of market value
for livestock mortality caused by a disaster; (2) the Livestock Forage Disaster
Program (LFP), to assist ranchers who graze livestock on drought-affected
pastureland or grazing land; and (3) the Emergency Assistance for
Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP), which provides up
to $50 million annually to compensate these producers for disaster losses not
covered under other disaster programs. As of December 3, 2013, cumulative
payments under these programs totaled $5.9 billion, as claims continue to
be processed for losses in 2011.

The 112th Congress considered but did not pass omnibus farm legislation, including
extension of certain agricultural disaster programs that expired in
September 2011. Instead, at the end of the 112th Congress, on January 2,
2013, the five-year 2008 farm bill was extended through September 30,
2013, as part of the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240),
but without funding for any of the 2008 farm bill disaster programs.

As a replacement for the 2008 farm bill (as extended under ATRA), the 113th Congress has been considering
an omnibus farm bill with agricultural disaster provisions (Senate-passed S.
954 and the House-passed bill, H.R. 2642). Conference on the two measures
is underway. Both the Senate and House farm bills would retroactively
authorize and fund the livestock disaster and tree assistance programs,
thereby potentially covering losses associated with the 2012 drought and other
weather events. The Senate disaster provisions would expire September 30, 2018,
while the programs in the House bill (with some differences) would be
authorized and funded without an expiration date.